The doctor will see you now ... online

Mainland’s inefficient medical system is spurring the growth of digital health care services that offer everything from online video consultations with doctors to home delivery of prescription medicines

PUBLISHED : Friday, 03 June, 2016, 7:13pm
UPDATED : Friday, 03 June, 2016, 7:13pm

Chen Jing is one of the millions of ordinary Chinese whose bad experiences of the country’s inefficient medical services are spurring a digital makeover of the health care industry that is creating multi-billion dollar opportunities for technology companies.

When the young consultancy company employee last went to Beijing’s Chaoyang Hospital with a bout of gastroenteritis, she simply gave up trying to see a doctor.

“The process was complex and the hospital was packed with people. I felt even more uncomfortable after waiting for more than an hour. Instead I bought some medicine from a pharmacy and went home,” she said.

Overstretched and underfunded hospitals, long waiting times, bureaucracy, reports of patients being forced to pay large amounts of money to get appointments with renowned specialists, often through dubious middlemen who take a cut, as well as the government’s desire to relieve the pressures on public health, are just some of the reasons behind the surging interest in online health care.

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“The demand for quality health care services is huge because the state health care system is not efficient, quality is not very good. These are the reasons driving online digital health care business models,” said Carl Berrisford, equity analyst of UBS CIO Wealth Management.

Measuring the spending on digital health care in the mainland, Boston Consulting Group forecast the market would expand from US$3 billion in 2014 to US$26 billion in 2017. Venture funding reached about US$700 million in 2014, pouring into businesses from e-commerce to online physician-and-patient communication services and disease management applications, it said in a study last September.

That’s good news for online medical start-ups like We Doctor.

Founded in 2010 as a platform to provide online registration and consultation services for patients, We Doctor moved a step forward last December by opening the first online hospital in Wuzhen, a small town in the southern province of Zhejiang.

The bricks-and-mortar hospital connects doctors with patients across the nation through its mobile app and website.

Patients can go through the entire process at home from online appointments, video consultations and diagnosis to e-prescriptions. They can also make e-payments and have the medicine delivered to their home.

We Doctor has connected more than 1,900 hospitals and over 200,000 doctors on its online platforms, and had more than 110 million registered users as of 2015.

The demand for quality health care services is huge because the state health care system is not efficient
Carl Berrisford, equity analyst, UBS CIO Wealth Management

There will be increasing demand for online diagnosis and remote consultations as more people look for quality and efficient medical services, said Zhang Guimin, marketing director at We Doctor, predicting huge opportunities in digital health care in the mainland.

“For example, in the face of an ageing population, the demand from those with chronic illnesses for online services will be huge, so that they won’t have to travel a long way to a hospital for follow-up consultations,” he added.

The company already has 7,000 teams of specialists from different hospitals across the nation with different areas of expertise that can be connected through the online platform, Zhang said.

We Doctor is now valued at about US$1.5 billion (HK$11.66 billion), and raised US$394 million last September in a new round of financing backed by Hillhouse Capital, Goldman Sachs and internet giant Tencent, among others.

Others to attract the attention of investors include Ping An Good Doctor, a unit of Ping An Insurance, which recently raised US$500 million in a series A funding round backed by local and overseas institutional investors.

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Anhao Times, a start-up focusing on online medical services for families in smaller towns and villages, raised 50 million yuan (HK$58.9 million) in April in its series A round, led by local venture fund Longling Capital.

The rush to invest in the digital health care sector will continue for the next two to three years as the growth potential is huge, said Jiang Xinhui, an analyst with Beijing-based consulting company Analysys International. It estimates the market for services provided by non-medical institutions alone, which covers such areas as arranging online registration and consultation as well as training, will more than double to 11.15 billion yuan this year, and grow to 20.09 billion yuan next year.

“These basic services have become more mature, companies are moving toward more in-depth areas such as internet hospitals to provide remote consultation and diagnosis, which will see better profitability,” Jiang said.

At the same time, the government’s intention to relieve pressure on public hospitals and clinics, address inefficiencies and meet patient needs is clear, and the development of digital health care can help through remote diagnosis and other consultation services, said Julien de Salaberry, founder of Singapore-based venture capital fund The Propell Group.

The fund focuses on the health care technology sector.

A report by Propell and law firm Baker & McKenzie said venture funding in digital health companies increased by 4 per cent to US$4.5 billion.

Venture capital funds are keener on investing in China and other Asian countries, considering the relatively high valuations in the digital health sector in the United States, and the trend will continue in the near future, Salaberry said.

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However, he said regulatory uncertainty is a major challenge for the sector to move forward.

“There is no clear regulation yet for health technology applications such as remote consultation,” he said.

The recent scandal involving Chinese search engine Baidu is a fresh alert that the government needs to tighten regulations, he added.

China’s internet regulator launched an investigation of Baidu’s advertising practices last month after the death of 21-year-old student Wei Zexi, who received an experimental treatment for a rare form of cancer from a hospital in Beijing that had been promoted through a paid placement on Baidu.

UBS CIO’s Berrisford also noted that some investors are cautious about the regulatory grey area. “The biggest issue at the moment is on regulatory. Whatever the business model, it is going to be subjected to regulatory,” he said.

This uncertainty may make it tough for smaller players or start-ups to move forward as they do not know what they can or cannot do.

But large insurers and e-commerce companies’ e-healthcare units should have better prospects, he said.

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Ping An Good Doctor is a good example as it can monitor customers’ basic conditions, which could be useful data for pricing its insurance policies, he said. “What is very valuable for insurance companies is big data about customers,” he said.

Nokia Growth Partners, a venture capital firm funded by the Finnish telecommunications company, is also looking at investment opportunities in China’s digital health care sector, partner and managing director David Tang said.

“Regulation is a matter when we consider whether we should invest in start-ups in remote diagnosis and medical consultation,” Tang said.

The fund prefers instead to focus on opportunities in health monitoring and home disease management, he said.

“Instead of medical services, the internet of things in health care can also help improve patient care and prevent illness, these are the areas that we are looking at,” he said.

The imbalance in the allocation of China’s health care resources and rising demand for quality medical services will continue to drive the growth, he added.